The Carter Family: Are You Lonesome Tonight?
Posted by Eddy Elfenbein on February 15th, 2008 at 3:54 pm

Is Obama Good for Business?
Posted by Eddy Elfenbein on February 14th, 2008 at 11:09 am

We better start asking now. Business Week writes:

So what would an Obama Presidency look like for business? “It would be a pragmatic, center-left administration,” says Democratic political strategist Steve McMahon, who is unaligned with a Presidential candidate this year. “He’s been pretty clear that business would have a seat at the table, but business wouldn’t be able to buy all the chairs.”
Obama’s record in the Senate is thin, but it does hold some indicators of where he might go as President. Obama has sponsored bills backing a host of traditional Democratic causes, from union labor to alternative fuel to the earned income tax credit. In one move that was unpopular among business executives, Obama sponsored a bill to give shareholders a nonbinding proxy vote on executive pay. Obama voted for a free-trade pact with Peru that contained provisos to protect the Peruvian environment and Peruvian labor. That’s popular stuff with the American left, but hard to take if you’re a U.S. business owner who wants costs to stay low in your new Peru operation. And in a reflection of the Democratic Party’s drift away from pure free-trade positions, Obama says he would look to amend the NAFTA trade agreement to add similar protections to the Clinton-era pact.

In October, George Will profiled Austan Goolsbee, one of Obama’s top economic advisers.

UNH on Sale
Posted by Eddy Elfenbein on February 13th, 2008 at 12:29 pm

If you can pull yourself away from the Roger Clemens’ testimony, share of UnitedHealth (UNH) are on sale today. New York’s Attorney General, Andrew Cuomo, has the company in his sites:

New York Attorney General Andrew Cuomo said on Wednesday he is conducting an industry-wide probe of health insurers into an alleged scheme to defraud consumers by manipulating reimbursement rates.
At the center of the scheme is Ingenix, the nation’s provider of health care billing information, which serves as a conduit for rate data to the largest insurers in the country, Cuomo said in a statement.
Cuomo intends to sue Ingenix, its parent, UnitedHealth Group Inc, and three additional subsidiaries.
Cuomo has issued 16 subpoenas to the nation’s largest health insurance companies, including Aetna Inc, Cigna Corp and Empire Blue Cross Blue Shield.

I can’t speak to the merits of the case, but the company has already projected EPS this year between $3.95 and $4. If you’re willing to wait, this is a good entry point.

DC Ward and Precinct Primary Results
Posted by Eddy Elfenbein on February 13th, 2008 at 6:34 am

My psuedo-state had its primary!
Here’s a spreadsheet of the unofficial results by each ward and precinct in the city of Washington. The Democrats are listed up top and the Republicans are below. (In Washington, it’s hard to tell if you have all the Republican votes, or if no one voted.)
On Democratic side, Obama creamed Hillary by more than 3-to-1. He won all eight wards and all 142 precincts. He even got majorities in every precinct too.
Because no one cares about us, there were no exit polls. So I got some demographic data off the web and ran a few regressions to see if I could estimate the breakdown.
My results show that African-Americans went for Obama by 86%, while whites and Hispanics both went 59% for Obama. Yep, that’ll pretty much carry you across the goal line.
There were 114,001 Democratic votes to just 5,803 Republican votes, that’s an edge of close to 20-to-1. Still, the GOP primary was for 19 delegates which seems absurdly high. By comparison, Virginia’s GOP primary had about 80 times the number of voters for just 63 delegates.
John McCain easily won the DC GOP primary, getting about four times as many votes as Mike Huckabee. Although Huckabee did pull out a narrow two-vote victory in DC’s 7th ward (56 to 54). Barack Obama got about 15,000 votes in the same ward.
The 9th Precinct in upper Northwest is DC’s most right-wing precinct which ain’t saying much. Kerry beat Bush in the 9th, 60%-38%. Still, it’s the Utah of Washington and McCain carried it with 87% of the vote.
I live in the 24th precinct where Obama beat Hillary by about 2-to-1. There were 881 Democratic voters to just 40 GOP votes. McCain got 29 votes. Ron Paul came in second with five. Huckabee had four and Guiliani got two.
Here’s a “heat map” of Obama’s support made by Adam Baily at DCist.com. The Nation’s Capital is clearly the ultimate blue state:

Life Imitates the Onion
Posted by Eddy Elfenbein on February 12th, 2008 at 4:32 pm

Seattle Times, February 12, 2008

Starbucks stores to shut 3 hours on Feb. 26 for retraining baristas

The Onion, March 14, 2004

Starbucks To Begin Sinister ‘Phase Two’ Of Operation

The SI Swimsuit Indicator
Posted by Eddy Elfenbein on February 12th, 2008 at 1:27 pm

This year’s cover features Marisa Miller which could be very bullish for stocks. When an American, such as Ms. Miller, appears on the cover, the Dow has gained an average of 13.9%. When there’s no American on the cover, the Dow has only gained 7.2%.
To think that some people still believe in EMH.
(Via Bespoke).

The S&P 500 and Its Earnings
Posted by Eddy Elfenbein on February 12th, 2008 at 1:15 pm

Here’s a look at the S&P 500:

The chart follows a logarithmic scale. (If I were smarter, I’d know how to make a logarithmic chart in Excel where I could zoom in on my high and low points. Since I can’t, this will have to do.)
The black line is the S&P 500 and it follows the left scale. The blue line is earnings and it follows the right scale. Where the lines intersect is a P/E ratio of 15.85 (which is 10^1.2).
In my opinion, this really wasn’t a valuation bubble where valuations overshot prices. Instead, the fundamentals tumbled beneath prices.

The Porn IPO
Posted by Eddy Elfenbein on February 12th, 2008 at 9:46 am

From the Guardian:

The stock market is to provide its first listing for a pornography publishing group as the adult magazines empire founded by Express owner Richard Desmond next week seeks a listing on the junior Plus Market.
Interactive Publishing, a shell group, is floating at the same time as agreeing a reverse takeover deal with Trojan Publishing, a private business that has built up a large portfolio of top-shelf titles such as Asian Babes, Forty Plus and New Talent.
Before buying rights to about 30 former Desmond titles last year, Trojan acquired about a dozen mostly adult magazines from British Virgin Islands-registered AML Publishing Trust in June 2006. A month later it signed a deal with Penthouse, licensing rights to Forum, an adult magazine for which Alastair Campbell once wrote a column entitled Riviera Gigolo.

Gilead on Wall Strip
Posted by Eddy Elfenbein on February 11th, 2008 at 3:37 pm

Today, Julie looks at Gilead (GILD). What I find amazing about this company is that it’s able to maintain 40% net profit margins. That’s crazy. I think if you go any higher, you’re officially in the mafia.

Do Stock Prices Have Memory?
Posted by Eddy Elfenbein on February 11th, 2008 at 1:44 pm

Felix Salmon recently had a post about a bet between Justin Wolfers and Barry Ritholtz on the stock market and trends. Barry took the pro-trend view while Justin stood for random walks. (For the record, Justin won $20 from Barry.)

There’s an emerging amount of literature on this topic and it’s starting to point toward the trend camp. As strange as this may sound, stock prices seem to have a bit of “memory.” One day’s move has an impact on the next day’s move. It’s not big, but it’s there. If the market followed a random walk, this shouldn’t happen. In my mind, this is another chink in the armor of EMH that can’t be easily dismissed.

Here’s a good example of what I mean. Plus, I guarantee you that this is one of freakiest charts you’ll see all day:

Ok, some explanation is needed. I took every daily change of the S&P 500 from 1950 to today and ranked them, left to right, going from worst to best. The blue line shows the cumulative gain of the next day’s market.

As you can see, if you stayed in after bad days, the market kept going down. After flat days, the market remained somewhat flattish. And after good days, the market continued to rally. Whatever one day’s trend was, it followed through to the next day.

The blue crosses 1.0 at a point that corresponds with a daily gain of 0.64%. This means that the market’s entire gain has come on days following a 0.64% up move. The rest of the time (over 80%), the market is net flat. Half the market’s gain came on day’s following 3.2% up moves. On average, that happens slightly less than once a year.

The black line shows the market’s behavior two days later and it’s much closer to what we would expect, a growing line without any strong discernable trend. Actually, to the extent there is a trend, it seems to be a small reversal from what the market did two days before (notice the strong rise early on followed by a weaker rally). Roughly speaking, two days after the market drops more than 0.8%, the market rises at an annualized rate of nearly 28%.

If the market is trend sensitive, then these reversals are crucial. They appear to happen after extreme moves.